Water Code
CHAPTER 67. NONPROFIT WATER SUPPLY OR SEWER SERVICE CORPORATIONS
Sec. 67.001. Definitions.
In this chapter:
(1) "Board" means the board of directors of a corporation.
(2) "Corporation" means a water supply or sewer service
corporation operating under this chapter.
(3) "Director" means a member of the board of directors.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.002. Purpose of Corporation.
A corporation may be organized under this chapter to provide:
(1) water supply, sewer service, or both for a municipality,
a private corporation, an individual, or a military camp or
base; and
(2) flood control and a drainage system for a political
subdivision, private corporation, or another person.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.003. Creation of Corporation.
(a) Three or more individuals who are citizens of this state
may form a corporation by making an application to the secretary
of state in the same manner as provided by law for an application
for a private corporation.
(b) The application for charter must include the number of
directors and the name of each director.
(c) The name designated for the corporation must include the
words "Water Supply Corporation."
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.004. Application of Texas Non-Profit Corporation Act.
To the extent it does not conflict with this chapter, the Texas
Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
Texas Civil Statutes) applies to a corporation created under:
(1) this chapter; or
(2) Chapter 76, Acts of the 43rd Legislature, 1st Called
Session, 1933 (Article 1434a, Vernon's Texas Civil Statutes).
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.005. Directors.
(a) A corporation may not have more than 21 directors.
(b) The corporation may increase the number of directors by
amendment to the bylaws but may not exceed the limit imposed by
Subsection (a).
(c) The bylaws of the corporation may provide that directors
serve staggered terms of approximately two or three years.
(d) At the first annual meeting of the shareholders, the
directors shall be divided into two or three classes according to
the length of the terms the directors serve. The classification
of directors may not take effect before that meeting.
(e) The division of the directors and the corresponding terms
must be set so that:
(1) one-half of the directors, as nearly as possible, are
elected annually, if a two-year term is provided; or
(2) one-third of the directors, as nearly as possible, are
elected annually, if a three-year term is provided.
(f) After the implementation of two-year or three-year terms
for directors, as directors' terms expire, the members shall
elect their successors to serve until the second or third
succeeding annual meeting after their election, as appropriate.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.006. Officers.
See, also, italicized material following text of this section
(a) The board shall elect a president, a vice president, and a
secretary-treasurer following the issuance of a charter and after
each annual meeting of the membership or shareholders.
(b) The board may require a bond of an officer for faithful
performance of the officer's duties.
(c) The salary of an officer of the corporation other than
secretary-treasurer or a manager employed under Section 67.012
may not exceed $5,000 a year. The board shall set the
secretary-treasurer's salary at an amount commensurate with the
secretary-treasurer's duties.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Amendment by Acts 1997, 75th Leg., ch. 688, Sec. 1
V.T.C.A., Government Code Sec. 311.031(c) provides, in part, that
the repeal of a statute by a code does not affect an amendment of
the statute by the same legislature which enacted the code and
that the amendment is preserved and given effect as part of the
code provision.
Section 1 of Acts 1997, 75th Leg., ch. 688, eff. June 17, 1997,
amends Sec. 5 of Vernon's Ann.Civ.St. art. 1434a [now this
section] without reference to the repeal of said article by Acts
1997, 75th Leg., ch. 166, Sec. 9. As so amended, Sec. 5 reads:
"After the issuance of a charter and annually thereafter
following the annual membership or stockholders meeting, the
board of directors shall elect a president, a vice president, and
a secretary-treasurer and may require of such officers bonds for
the faithful performance of their duties. At the meeting, each
member or stockholder shall be allowed only one vote regardless
of the number of memberships or stock certificates held by the
person. The annual meeting of the members or stockholders of the
corporation shall be held at any time between January 1 and May 1
of each year, at such time as shall be specified by the by-laws
or the board of directors of the corporation. The salaries of
all the officers of said corporation except that of the
secretary-treasurer and of the manager whose salary is
hereinafter referred to, shall not exceed Five Thousand Dollars
($5,000) per year. The salary of the secretary-treasurer shall
be fixed by the board of directors at a sum commensurate with the
duties required of him."
Sec. 67.007. Annual Meeting.
The annual meeting of the members or shareholders of the
corporation must be held between January 1 and May 1 at a time
specified by the bylaws or the board.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.008. Distribution of Profits.
(a) The incorporators may provide in the charter of the
corporation that a dividend will not be paid on the stock and
that all profits of the corporation will be paid annually to
political subdivisions, private corporations, or other persons
that have transacted business with the corporation during the
previous year.
(b) The corporation shall distribute any profits under
Subsection (a) in direct proportion to the amount of business the
corporation transacts with each entity during that year.
(c) The corporation may not make a distribution under
Subsection (a) if the corporation has unpaid indebtedness.
(d) A corporation may allocate to a sinking fund an amount of
the annual profits as determined necessary by the board for
maintenance, operation, and replacements.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.009. Facilities.
A corporation may construct, acquire, lease, improve, extend,
or maintain a facility, plant, equipment, or appliance helpful or
necessary to provide more adequate sewer service, flood control,
or drainage for a political subdivision.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.010. Power to Contract With Other Entities.
See, also, italicized material following text of this section
(a) A corporation may enter into a contract with any political
subdivision, federal agency, or other entity for the acquisition,
construction, or maintenance of a project or improvement for an
authorized purpose.
(b) A corporation may obtain money from any political
subdivision of this state, federal agency, or other entity to
finance the acquisition or construction of a project or
improvement for an authorized purpose.
(c) A corporation may encumber the project or improvement and
may encumber any income, fees, rents, and other charges derived
from the operation of the project or improvement. The
corporation may issue bonds, notes, or warrants to secure payment
of funds received. Indebtedness authorized by this subsection is
a charge only on specifically encumbered property and revenues
and is not a general obligation of indebtedness of the
corporation.
(d) A political subdivision may contract with a corporation
under Section 402.014, Local Government Code, to carry out this
chapter. (V.A.C.S. Art. 1434a, Secs. 2(a), (b).)
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Amendment by Acts 1997, 75th Leg., ch. 532, Sec. 1
V.T.C.A., Government Code Sec. 311.031(c) provides, in part, that
the repeal of a statute by a code does not affect an amendment of
the statute by the same legislature which enacted the code and
that the amendment is preserved and given effect as part of the
code provision.
Section 1 of Acts 1997, 75th Leg., ch. 532, eff. May 31, 1997,
adds Sec. 2(e) and (f) of Vernon's Ann.Civ.St. art. 1434a [now
this section] without reference to the repeal of said article by
Acts 1997, 75th Leg., ch. 166, Sec. 9. As so added, Sec. 2(e)
and (f) read:
"(e) Water supply and sewer service corporations may enter into a
contract with a municipality or a volunteer fire department under
which the water supply or sewer service corporation may supply
water either to municipally owned fire hydrants or to water
supply or sewer service corporation fire hydrants for the
purposes of fire suppression by the municipality's fire
department or a volunteer fire department. The contract shall be
under such terms and conditions as shall be mutually beneficial
to the contracting parties.
"(f) The furnishing of a water supply and fire hydrant equipment
by a municipality or a volunteer fire department directly or
through another entity by a lease, contract, or any other manner
is an essential governmental function and not a proprietary
function for all purposes, including the application of Chapter
101, Civil Practice and Remedies Code. A water supply or sewer
service corporation that contracts with a municipality or
volunteer fire department to provide a water supply or fire
hydrant equipment shall be liable for damages only to the extent
that the municipality or volunteer fire department would be
liable if the municipality or volunteer fire department were
performing the governmental function directly."
Sec. 67.011. Powers of Corporation in Certain Counties.
In a county with a population of less than two million, a
corporation may:
(1) own, hold, lease, or otherwise acquire water wells,
springs, or other sources of water supply;
(2) build, operate, and maintain pipelines to transport
water or wastewater;
(3) build and operate plants and equipment necessary to
distribute water or to treat and dispose of wastewater; and
(4) sell water or provide wastewater services to a political
subdivision, a private corporation, or an individual.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.012. Use of Manager.
The board may employ a manager to handle the business of the
corporation under the direction of the board. The board shall
set the salary for the manager.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.013. Use of Counsel.
The board may employ and compensate counsel to represent the
corporation as the board determines is necessary.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.014. Depository of Funds.
(a) The board shall select as depository for the funds of the
corporation a bank in this state that is insured by the Federal
Deposit Insurance Corporation and require from the depository a
bond in an amount the board finds necessary to protect the
corporation.
(b) Funds allocated by the board to a sinking fund for
replacement, amortization of debts, and the payment of interest
that are not required to be spent in the year in which deposited
shall be:
(1) invested in bonds or other evidence of indebtedness of
the United States;
(2) placed with the depository in an interest-bearing
savings account; or
(3) invested in shares or share accounts in a savings and
loan association insured by the Federal Deposit Insurance
Corporation.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.015. Exemption From Securities Act.
The Securities Act (Article 581-1 et seq., Vernon's Texas Civil
Statutes) does not apply to:
(1) a note, bond, or other evidence of indebtedness issued
by a corporation doing business in this state to the United
States;
(2) an instrument executed to secure a debt of a corporation
to the United States; or
(3) the issuance of a membership certificate or stock
certificate of a corporation.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.016. Transfer or Cancellation of Stock, Membership, or Other Right
of Participation.
(a) A person or entity that owns any stock of, is a member of,
or has some other right of participation in a corporation may not
sell or transfer that stock, membership, or other right of
participation to another person or entity except:
(1) by will to a person who is related to the testator
within the second degree by consanguinity;
(2) by transfer without compensation to a person who is
related to the owner of the stock or other interest within the
second degree by consanguinity; or
(3) by transfer without compensation or by sale to the
corporation.
(b) Subsection (a) does not apply to a person or entity that
transfers the membership or other right of participation to
another person or entity as part of the conveyance of real estate
from which the membership or other right of participation arose.
(c) The transfer of stock, a membership, or another right of
participation under this section does not entitle the transferee
to water or sewer service unless each condition for water or
sewer service is met as provided in the corporation's published
rates, charges, and conditions of service. A transfer and
service application must be completed on the corporation's
standardized forms and filed with the corporation's office in a
timely manner. The conditions of service may not require a
personal appearance in the office of the corporation if the
transferee agrees in writing to accept the rates, charges, and
conditions of service.
(d) The corporation may make water or sewer service provided as
a result of stock, a membership, or another right of
participation in the corporation conditional on ownership of the
real estate designated to receive service and from which the
membership or other right of participation arises.
(e) The corporation may cancel a person's or other entity's
stock, membership, or other right of participation if the person
or entity fails to:
(1) meet the conditions for water or sewer service
prescribed by the corporation's published rates, charges, and
conditions of service; or
(2) comply with any other condition placed on the receipt of
water or sewer service under the stock, membership, or other
right of participation.
(f) Consistent with Subsection (a), the corporation may
reassign canceled stock or a canceled membership or other right
of participation to a person or entity that has legal title to
the real estate from which the canceled membership or other right
of participation arose and for which water or sewer service is
requested.
(g) Notwithstanding Subsection (a), the corporation shall
reassign canceled stock or a canceled membership or other right
of participation to a person or entity that acquires the real
estate from which the membership or other right of participation
arose through judicial or nonjudicial foreclosure. The
corporation may require proof of ownership resulting from the
foreclosure.
(h) Service provided following a transfer under Subsection (f)
or (g) is made subject to compliance with the conditions for
water or sewer service prescribed by the corporation's published
rates, charges, and conditions of service.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997.
Sec. 67.017. Voluntary Contributions on Behalf of Emergency Services.
(a) A corporation may as part of its billing process collect
from its customers a voluntary contribution, including a
voluntary membership or subscription fee, on behalf of a
volunteer fire department or an emergency medical service.
(b) A corporation that collects contributions under this
section shall provide each customer at the time that the customer
first subscribes to the water or sewer service, and at least
annually thereafter, a written statement:
(1) describing the procedure by which the customer may make
a contribution with the customer's bill payment;
(2) designating the volunteer fire department or emergency
medical service to which the corporation will deliver the
contribution;
(3) informing the customer that a contribution is voluntary;
and
(4) describing the deductibility status of the contribution
under federal income tax law.
(c) A billing by the corporation that includes a voluntary
contribution under this section must clearly state that the
contribution is voluntary and that it may be deducted from the
billed amount.
(d) The corporation shall promptly deliver contributions that
it collects under this section to the designated volunteer fire
department or emergency medical service, except that the
corporation may keep from the contributions an amount equal to
the lesser of:
(1) the corporation's expenses in administering the
contribution program; or
(2) five percent of the amount collected as contributions.
Added by Acts 1997, 75th Leg., ch. 166, Sec. 2, eff. Sept. 1,
1997